Daily Mortgage Rate Lock Advisory

Rate Lock Advisory – Tuesday Nov. 25th

Tuesday’s bond market has opened sharply higher following more bailout news from the Fed that is being received as very favorable for bonds and mortgage rates. The stock markets are in negative territory with the Dow down 5 points and the Nasdaq down 18 points. The bond market is currently up 50/32, which will likely improve this morning’s mortgage rates by approximately .750 of a discount point over yesterday’s rates.

There were two important pieces of economic data released this morning, giving us mixed results. The first revision to the 3rd Quarter Gross Domestic Product (GDP) came in at ?0.5%, which was close to latest forecasts. This means that economic activity during the 3rd quarter was weaker than analysts had predicted last month but close to their latest projections. Accordingly, this data has not had much of an impact on this morning’s mortgage rates.

November’s Consumer Confidence Index (CCI) was also released this morning, showing a reading of 44.9. This was much higher than the 39.5 reading that was expected, indicating that consumers were more optimistic about their own financial situations than many had thought. This is considered negative news for bonds and mortgage rates because rising confidence usually means consumers are more apt to make large purchases in the near future.

Today’s news from the Fed amounts to a more direct support of the mortgage market than the previous moves. In short, the Fed is going to pump $600 billion directly into mortgage lending that should significantly increase cash flow to make new loans to homeowners and homebuyers. The previous announcements were directed more at shoring up the banking side of financial system and somewhat ignored the mortgage side. Today’s news is being considered great for future mortgage activity, and therefore, hopefully will help stabilize home prices.

There are four important reports scheduled to be posted tomorrow morning. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items. It is expected to show a 2.5% drop in new orders. A larger decline would be good news for the bond market and mortgage rates.

The second is October’s Personal Income and Outlays data. This data is thought to measure consumers’ ability to spend and their current spending habits. It is expected to show that income rose 0.1% and that spending fell 0.7%. Smaller than expected readings would be good news for bonds and could lead to improvements in mortgage rates.

The revised November reading to the University of Michigan Index of Consumer Sentiment will also be posted late tomorrow morning. Analysts are expecting to see little change to the preliminary reading of 57.9. Unless we see a significant variance from the forecasted reading, I don’ t think this data will cause much movement in mortgage rates tomorrow.

The fourth is October’s New Home Sales, but I don’t expect it to have any impact on the bond or mortgage markets. Keep in mind that the bond market will close early tomorrow ahead of the Thanksgiving Day holiday, so we may see additional volatility as traders protect themselves over the long weekend. Many traders will by keeping a skeleton staff Friday, meaning tomorrow is really the last relevant trading day until Monday morning.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.